TaxTMI 
TaxTMI 
2017 (6) TMI 340
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....aw, the learned Commissioner of Income Tax (Appeals) {"Ld. CIT(A)"} erred in concluding that assessment proceedings under Section 147/148 of the Act were initiated correctly by learned Assessing Officer ("Ld. AO") beyond the period of 4 years and from the end of the assessment year. 2) That on the facts and circumstances of the case & in law, the learned CIT(A) has grossly erred in upholding the disallowance of depreciation amounting to Rs. 56,54,840/- on the intangible asset of "Government Authorizations" which was acquired by the appellant under a Business Transfer Agreement with the Kilburn Officer Automation Limited. 3) That the Learned CIT(A) has erred in upholding the disallowances of depreciation on the business or commercial rights acquired in the form of non-compete rights under Section 32 of the Act having treated the said non-compete fee as capital expenditure in nature. 4) That the Learned CIT(A) has grossly erred in not allowing depreciation on Goodwill being an intangible asset on which depreciation is mandatorily allowable. That the above grounds of appeal are without prejudice to each other. That the appellant reserves its right to add, alter, amend or with....
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....orization" do not form part of the specified asset, therefore, the claim of the depreciation by the assessee on "Government Approvals" was not as per the provisions of the law. Thus, according to the Assessing Officer, excessive depreciation amounting to Rs. 56,54,840/- was allowed to the assessee and income to that extent was under assessed in the assessment order dated 28/12/2007. Accordingly, the Assessing Officer recorded reasons to believe that income escaped assessment and reopened the assessment proceedings under section 147 of the Act after obtaining approval of the competent authority and issued notice under section 148 of the Act on 25/03/2011. A copy of reasons recorded was also provided to the assessee alongwith notice under section 148 of the Act. In response, the assessee company filed return of income on 03/05/2011 declaring total income of Rs. 2,15,72,860/-. The Assessing Officer issued statutory notices under section 143(2) and 142(1) of the Act which were duly complied. The assessee objected initiation of reassessment proceedings after the expiry of four years from the end of relevant assessment year and contended that there was no failure on the part of the asses....
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....tion schedule, the depreciation claimed of Rs. 56,45,639/- @ 25% on Government Authorizations Of Rs. 4,41,66,706/- was shown. 4.2 According to the Assessing Officer above disclosure was not sufficient to meet the requirement of law (i.e. proviso to section 147 of the Act) that the assessee should have disclosed 'fully and truly' all material facts necessary for the assessment, due to following reasons: (i) The assessee did not disclose the claim of depreciation on government approvals in the return of income or in the original assessment proceeding except mentioning the claim in the depreciation chart filed alongwith the original return of income. (ii) The assessee neither in the return of income nor in the assessment proceeding disclosed any fact with regard to ineligibility of assets on which depreciation was claimed and had been allowed. (iii) In assessment proceedings, by stating that "no asset valuing above Rs. 10 lakhs" was acquired by the assessee during the year, the assessee misrepresented the facts. 4.3 According to the Assessing Officer, the reassessment was not due to change of opinion but it was due to infusion of certain new facts, which were not availa....
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....ciation on Government Authorization and thus the Assessing Officer also did not examine the said claim of depreciation. 4.4.3 According to the Ld. CIT-(A), the assessee had not furnished any information regarding fixed assets during the original assessment proceeding including intangible assets and thus the claim of the assesses that it had furnished all the requisite information and same were examined by the Assessing Officer, was false and not based on evidences. In view of the Ld. CIT(A), since the Assessing Officer had not examined the claim of depreciation amounting to Rs. 56,54,840/- during the assessment proceeding, there was no question of any "change of opinion" while reopening assessment under section 147 of the Act. 4.4.4 According to the Ld. CIT-(A), the assessee had not disclosed fully and truly all material facts necessary for their assessment and, therefore, the Assessing Officer was correct in reopening the assessment under section 147 of the Act. 4.4.5 According to the Ld. CIT-(A), the excess depreciation of Rs. 56,45,839/- has been claimed and allowed to the assessee on the Government Authorization, and thus income had escaped assessment in view of the deemi....
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....ent Authorization was fully disclosed in the return of income filed along with financial statements and Tax Audit Report (TAR) and all the claims of the assessee were accepted by the Assessing Officer during the original assessment proceeding, other than that of non-compete fee. 4.5.2 He further submitted that the question of any failure or omission on the part of the assessee to disclose fully and truly all material facts which were necessary for its assessment, does not and cannot arise as all primary and material facts were already made available to the Assessing Officer and were considered while finalizing the assessment. 4.5.3 The Ld. counsel further submitted that while passing the original assessment order, the Assessing Officer referred to the 'BTA' and disallowed the non-compete fees, so it cannot be said that the assessee has failed to disclose the material evidence as both non-compete fee and Government Authorization were reported under the same 'BTA'. Regarding the finding of the Assessing Officer that details related to fixed asset were not furnished in the original assessment proceeding, when called for, the Ld. counsel submitted that the Assessing Officer has s....
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....rther relied on the order of the Assessing Officer and Ld. CIT-(A) and submitted that the assessee has not fully disclosed the facts in respect of depreciation on Government Authorizations and even misled the Assessing Officer by representing wrong facts that no asset more than Rs. 10 lakhs were acquired by the assessee during the relevant year. He submitted that it is specifically mentioned in Explanation-1 under section 147 of the Act that production of books of accounts or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer, will not necessarily amount to disclosure within the meaning of the proviso below section 147 of the Act. 4.7 In the rejoinder, the Ld. counsel submitted that the assessee had made full disclosure in respect of depreciation on Government Authorizations in the return of income and the assessee was not required to explain in the return of income that particular claim is justified or not. 4.8 We have heard the rival submission and perused the relevant material on record. We find that the assessee has challenged the validity of the reassessment proceeding on two grounds. According to the first ....
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....2(1) or section 148 of the Act or (b)to disclose fully and truly all material facts necessary for his assessment for that assessment year. 4.8.3 Thus, whenever assessment is completed under section 143(3) or section 147 of the Act and four years have already elapsed from the end of the relevant assessment year, the assessment can be reopened only in the case there was a failure on the part of the assessee to either file return of income under section 139/142(1)/148 or disclose fully and truly all material facts necessary for the assessment. 4.8.4 In the instant case, the original assessment was completed under section 143(3) of the Act and four years have already elapsed on the date of reopening of the assessment i.e. 25/03/2011, the prerequisite for reopening of the assessment was failure on the part of the assessee to fully and truly disclose material facts necessary for the assessment. 4.8.5 On perusal of the orders of the lower authorities and the submission of the Ld. counsel of the assessee, we find that in the return of income filed alongwith financial statements and tax audit reports, the assessee has disclosed the fact of depreciation on government authoriza....
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....-was immaterial. We are not convinced with this argument of the Ld. counsel of the assessee. In the books of accounts or financial statement, a company might treat particular expenditure as capital expenditure or revenue expenditure according to its suitability to disclose profitability before the shareholders, however in the return of income filed before the tax authorities, the treatment of any expenditure is to be decided as per the provisions of the income tax Act and therefore it has to be reported accordingly. Therefore, mentioning of Government Authorization as intangible assets in audited financials, significant accounting policies or notes to account is not relevant for the purpose of Income-tax Act. What is material and relevant is, how it was claimed in the return of income filed by the assessee. Thus, it cannot be said that mentioning of Government Authorization in the said schedule automatically disclosed the fact of claim of depreciation on such Government Authorization in the return of income. The Assessing Officer made the specific query to ascertain the claim of depreciation and asked the assessee to furnish the documentary evidence of assets acquired having value ....
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....he Government Authorization. Discovery of the facts that the assessee claimed depreciation on government authorization constitute an information, and this information came to the Assessing Officer after the original assessment by fresh facts revealed later on. In such circumstances the issue of change of opinion in the reassessment proceedings cannot arise, when no opinion was framed on the issue of depreciation on government authorization in the original assessment proceeding. In similar facts, Hon'ble Supreme Court in the case of Kalyanji Mavji & Co. Versus CIT (supra) held as under: "12. We might mention that it was submitted by Mr. Banerjee that in fact the amount sought to be deducted was paid towards the income-tax liability of the partners and this was done to protect the business itself and to improve the credit of the partners. Even this specific plea does not appear to have been taken before the ITO. We are, however, not concerned with this particular plea because we are given to understand by the counsel for the appellant that the appeals against the assessment orders for the years 1958-59 and 1959- 60 are pending before the IT authorities. In these circumstances we a....
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....ete agreements, customer and vendor lists, transferred employees, contracts, and all other rights in respect of mailing business of M/s KOAL. After a period of almost one year, the assessee assigned values to the non-compete fee and Government Authorization, on the basis of valuation conducted by a consultant at the request of the assessee. The assessee assigned value of Rs. 4,51,66,708/-to Government Authorization/Approvals and claimed depreciation at the rate of 25% amounting to Rs. 56,54,840/- treating the same as a depreciable intangible asset. 5.1 Before the Assessing Officer, the assessee contended that Government Approvals are an asset in the nature of license/commercial rights which it had acquired from M/s KOAL and, thus, eligible for depreciation being intangible assets. The assessee was asked by the Assessing Officer to provide a copy of the financial statement of M/s. KOAL as on the date of its takeover, for ascertaining the values assigned to various assets, however, same was not made available by the assessee. 5.1.1 According to the Assessing Officer, no value was assigned by the assessee in the 'BTA' dated 15/10/2004 while acquiring the mailing business from M/....
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....ngly denied the claim of depreciation on Government Authorization/Approvals. 5.1.6 The Ld. Commissioner of Income-tax (Appeals) also upheld the view of the Assessing Officer relying on his finding in assessment year 2007-08 as under: "5.2 The above submissions are vague and without any factual basis. The appellant is not even clear as to about the asset it obtained from M/s Kilburn Offices Automation Ltd., but states that no value was assigned to any of the individual assets. Neither had the appellant clarified as to how the asset can be termed 'intangible' nor the computation of its value in its submissions. The appellant's appears to be of the view that Me AO is bound to accept the independent professional firm's valuation and the financial statement submitted as tax audit report. The AO is empowered by the income tax Act to examine the facts of the case and then decide whether the appellant is entitled for any deduction as per the provisions of the Act. The onus is on the appellant to prove that they are entitled for the depreciation they have claimed in the return of income. In this case, the appellant has failed to discharge this onus both at the assessment ....
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....er clause 2.2(e) of the 'BTA' and the specific authorization transferred to the assessee were also listed in the schedule 2.2 (e) of the BTA ( refer page 13 and 50 volume 1 of paper book). Such government authorizations are transferable and same were actually transferred in the name of the assessee after KOAL granted a no objection certificate in the name of the assessee company. The transfer was also acknowledged by the Department of post (refer page 429 to 430 of the paper book). Thus, the contention of the AO the KOAL had no authority to transfer the government authorization is completely incorrect. (iii) The contention of the Assessing Officer M/s KOAL had not paid any sum to the regulatory authorities for acquisition of these government authorization or whether government authorization have been recognized as assets in the books of KOAL, is completely irrelevant. The emphasis may be placed on the fact that this intangible asset is not self generated by the assessee and has been acquired by paying the price for the same, which is duly supported by the valuation report of an independent valuer. The actual cost to the assessee as provided in section 43(1) of the Act is to be c....
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....cannot be ignored or rejected on the ground that it provides the valuation of assets on a prior date and this principle has been upheld by the Ahmedabad ITAT in the case of Chitra Publicity Co. (P) Ltd vs. ACIT (2009) (127 TTJ 1). It was held in the aforementioned case that once the appellant has duly obtained a valuation report for valuing the assets acquired by it, it is incumbent upon the authority to dislodge the same by bringing adequate material on record, because in the absence of the same a technical expert's opinion (valuer's report) cannot be dislodged by the authority by merely ignoring the same. Reliance is also placed on the ruling given by the Gujrat High Court in the case of Ashwin Vanaspati Industries vs. CIT (2002) (174 CTR 90). (vii) Further, the Appellant wishes to highlight that the Ld. AO and Ld. CIT(A) completely failed to appreciate that the technology, trademark, copyright, patent, etc. in respect of the electronic franking machines were held by Pitney Bowes Inc. and not by the Appellant. The Ld. AO and Ld. CIT(A) have completely confused themselves and have failed to differentiate between two different legal entities operating in two separate countr....
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....e of asset, in the form of 'license' i.e. license to have an access and to carry out exploration, development and production of hydrocarbon operations and is eligible for depreciation under the provisions of the Act. (xii) It is also submitted that the Hon'ble Supreme Court in the case of Techno Shares and Stocks Ltd. (2010) 327 ITR 323 has overruled the judgment of Hon' Bombay High Court in the case of Techno Shares and Stocks Ltd. (2010) 323 ITR 69 wherein it was held that the intangible assets as mentioned in section 32(l)(ii) could only be in the nature of intellectual property rights. The Hon'ble Supreme Court has clearly held that the intangible asset can be in the nature of business or commercial right which is not in the nature of intellectual property. Thus, the belief of the Ld. AO is completely misplaced and unjustified. (xiii) The permission to market the electronic franking machine and tax meters from Department of Posts and various State Governments ("Government Authorizations") are thus in the nature of "License" which is squarely covered within the ambit of section 32 of the Act and were duly shown under the head "Intangible Assets" in the ....
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....nces, franchises or any other business or commercial rights of similar nature. Explanation 4.-For the purposes of this sub-section, the expression "knowhow" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto)." 5.5 Thus, as per the provisions of the Act depreciation is allowable on intangible assets of the nature mentioned in the provision, which are acquired on or after 01/04/1998 and then owned and used for the purpose of business, then depreciation shall be allowed at the rate prescribed under Rule 5 and Appendix- I of Income Tax Rules, 1962. 5.6 In the case of M/s ONGC Videsh Ltd. (supra), the assessee was engaged in exploration, development and production of hydrocarbons in overseas jurisdictions to augment the oil security of India mainly by way of acquiring participating interest in production sharing contracts. During the year under consideration, the assessee through an assignment agreement dt. 10th Feb., 2001 with consortium members and the....
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....er parties subject to the terms and conditions of the PCA and approval of the Government. The assessee by virtue of acquisition of 20 per cent participating interest became the member of the consortium and acquired proportionate share in rights and licenses granted by the Russian State for Sakhalin Block. By acquiring these business rights and production licenses, the assessee became entitled to carry on hydrocarbon operations in the Sakhalin project. The statutory expression of the provision granting depreciation on intangible asset is that : "know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after 1st April, 1988." 13. A reading of the above statutory expression brings home the point that the law has specified items of intangible assets eligible for depreciation in the following categories : (i) Know-how (ii) Patents (iii) Copyrights (iv) Trademarks (v) Licences (vi) Franchises (vii) Any other business or commercial rights of similar nature. 14. So far as claim of depreciation in case of intangible assets falling in the category of "any ....
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....at same is commercial right, therefore in the nature of asset in the form of license. This right had been granted to the assessee by way of license and the assessee became owner of such right i.e., license to have an access and to carry on of business of exploration and development of mineral oil. Accordingly, as per our considered view such an asset falls within the category of asset falling under s. 32(1)(ii) of the Act. Accordingly, we are inclined to agree with the learned senior counsel that the assessee had acquired business and commercial right and license by making payment of Rs. 1,559.10 crores, which is in the nature of intangible assets entitled to claim of depreciation under s. 32(1)(ii) of the IT Act. 14A. In view of the above discussion assessee's claim for allowing deduction of entire expenditure of Rs. 1,559.10 crores is declined. The stand of CIT(A) in treating the alleged expenditure as deferred revenue expenditure and directing the AO to allow 1/19th of the expenditure during the year is also declined, since there is no concept of deferred revenue expenditure under IT Act. As we have treated the expenditure as capital in nature the same is eligible for claim o....
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....ct from the date of issue of this letter. The following Pitney Bowes Electronic Franking Machines(EFMs) were earlier approved by the Department of Posts for distribution through M/s. Kilbum Office Automation Limited. SI. No. Model Approval No. & Date 1. A-900 No.53-2/93-PMB(CPT) dated 3.10.96. 2. B-900 No.2-3/96 CPT II dated 28.7.98 3. GKM(E700) No.2-3/96 CPT II dated 29.7.98 4. B-700 No.2-6/98-CPT.n dated 23.9.99 3. The conditions governing the approval of EFMs models cited above are hereby reiterated again as under for your information: (i) M/s. Pitney Bowes India Pvt. Limited (PBIL) will have to adhere to the specifications of model approved and no modifications to any part of the said models should be done without written and prior approval of the Department of Posts. (ii) PBH will have to maintain a record showing sale of machines to each party with particulars of Licence issued in respect of each machine and this, record will be open Jo scrutiny of authorized officials of the Department of Posts without prior notice. (iii) PBIL will be held responsible for any misuse of the machine and any tampering that may occur in th....
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....y rights in favour of M/s KOAL. The letter, if any issued communicating approvals of machines of Piteny Bowes to M/s KOAL, was not because of any kind of eligibility criteria of said company. The letter issued to M/s KOAL would be in its agent status and compliance of which was dependent on supply of machines by the Pitney Bowes Inc, USA to M/s KOAL. The moment, the Pitney Bowes Inc USA, terminates the agreement of distribution of its machines, the letter issued by the Department of post in the name of M/s KOAL also loses its sanction. The KOAL has not got any rights to sale in favour due to letter issued by the Department of Post. M/s KOAL got letter for sale of machines of M/ s Pitney Bowes Inc, USA because it was distributor of said company and thus it got right to sale of those machines in India because of its distribution rights. We do not find any material which could suggest that M/s KOAL was having right of transferring such "letter communicating approvals by the Department of Post" to any person of its choice. The Department of post has conveyed approval of the machines of "Pitney Bowes Inc. USA" and imposed certain obligations on the assessee to perform. In view of our di....
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.... authorization/approvals are neither license nor the rights of business or commercial nature in the hands of M/s. KOAL, which could be transferred to the assessee and therefore no depreciation on the value assigned to government organizations/approvals by the assessee, could be allowed to the assessee. The ground of appeal is accordingly dismissed. 6. In ground No. 3 the assessee has challenged depreciation disallowed on non-compete fee. 6.1 The Tribunal in its order dated 12/11/2010 in ITA No. 1428/Del/2009 and CO No. 178/Del/2009 in appeal against the order of the Ld. CIT-A arising from the original assessment under section 143(3) of the Act dated 28/12/2007, upheld the non-compete fee expenditure of capital nature, however the alternative plea of allowing depreciation on non-compete fee, if the same was held to be of capital nature, was restored to the file of the Assessing Officer. The issue of non-compete fee as capital expenditure was subsequently upheld by the Hon'ble High Court as well as Hon'ble Supreme Court. The Assessing Officer in compliance to the direction of the Tribunal raised queries to the assessee. The assessee contended that non-compete fee is squarely fa....
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.... CIT vs. Ingersoll Rand International Ind. Ltd. [2014] 48 taxmann.com 349 (Kar-HC) (refer from page 219 to 227 of the Paper book for case laws), wherein the Hon'ble high court held: "The term 'or any other business or commercial rights of similar nature' has to be interpreted in such a way that it would have some similarities as other assets mentioned in Cl.(b) ofExpln.3. Here the doctrine of ejusdem generis would come into operation and therefore the non-compete fee vests a right in the assessee to carry on business without competition which in turn confers a commercial right to carry on business smoothly. When once the expenditure incurred for acquiring the said right is held to be capital in nature, consequently the depreciation provided under Sec.32(l)(ii) is attracted and the assessee would be entitled to the deduction as provided in the said provision "(para 8) (refer page 227 of the Paper book for case laws)." 6.4 On the other hand, the Ld. Senior DR submitted that the decision of the Tribunal in the case of M/s. Sharp Business System Ltd.(supra) has been upheld by the Hon'ble Delhi High Court and which is reported as Sharp business system versus Commissioner ....
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.... intellectual property right implies exclusion of others, who do not own or have license to such rights from using them in any manner whatsoever. Similarly, in the matter of franchises and know-how, the primary brand or intellectual process owner owns the exclusive right to produce, retail and distribute the products and the advantages flowing from such brand or intellectual process owner, but for the grant of such know-how rights or franchises. In other words, out of these species of intellectual property like rights or advantages lead to the definitive assertion of a right in rem. The decisions of this Court in Hindustan Coco Cola Beverages P. Ltd. ITA-492-12 Page 11 (supra) and that of the Kerala High Court in B. Ravindran Pillai (supra) underlined that goodwill is also a species of depreciable right which can claim the benefit of Section 32. Those decisions were based on the ruling of the Supreme Court in CIT v. B.C. Srinivasa Setty 1981 (128) ITR 294 (SC) and subsequent cases which have ruled that goodwill is a depreciable capital asset. So far as the decisions in Techno Shares & Stocks Ltd. (supra) is concerned, the Supreme Court clearly limited its holding that the right ....
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....right "in personam". Indeed, the 7 years period speltout by the non-competing covenant brings the advantage within the public policy embedded in Section 27 of the Contract Act, which enjoins a contract in restraint of trade would otherwise be void. Another way of looking at the issue is whether such rights can be treated or transferred - a proposition fully supported by the controlling object clause, i.e. intangible asset. Every species of right spelt-out expressly by the Statute - i.e. of the intellectual property right and other advantages such as know-how, franchise, license etc. and even those considered by the Courts, such as goodwill can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal. As a consequence, it is held that the contentions of the assessee are without merit; this question too is answered against the appellant and in favour of the Revenue." 6.7 Respectfully, following the above decision of the Hon'ble High Court, we uphold the finding of the Ld. CIT-(A) on the issue in dispute. The ground of the appeal is accordingly dismissed. 7. In ground No. 4 the assessee has challenged disallowance of depreciation on....
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....siness contract, transfer of employees etc. In support of the contention that goodwill is an intangible assets eligible for depreciation, the Ld. counsel relied on following decisions: (i) Area T & D India Ltd versus DCIT(2012) 341 ITR 421(Del). (ii) CIT versus Smifs securities Ltd (2012) 348 ITR 302(SC) (iii) Triune energy services private limited versus DCIT (2016) 65 taxmann.com 288 (Delhi) 7.2.1 Further, the Ld. counsel relied on the following decisions where it is held that excess consideration over the value of net assets was considered as goodwill: (i) decision of the Tribunal, Mumbai bench in the case of DCIT Vs. Toyo Engineering India Ltd. in ITA No. 3279/M/2008 (ii) decision of the Tribunal, Hyderabad bench in ITA No. 198/Hyd/2011 7.2.2 Further, the Ld. counsel submitted that in the eventuality that value of the Government Authorization is held to be of not of any value then that amounts may be allocated to goodwill and depreciation might be allowed accordingly. 7.3 On the other hand, the Ld. Senior DR, relied on the order of the Ld. CIT-(A) and submitted that there was no mention of goodwill in the "BTA" between the assessee and M/s KOAL for slum ....
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....ion 3 states that the expression "asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words "any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression "any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). In the circumstances, we are of the view that "Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 7.4.1 In the case of Avera T & D India Ltd (supra), Hon'ble jurisdictional High Court, held the business information, business records, contracts, skilled employee, know-how etc as business and commercial rights eligible for depreciation under section 32(1)(ii) of the Act, however the issue of eligibility of goodwill for depreciation was not decided. Regarding goodwill, the Hon'ble court observed as under: "15. In view of the above, it is not necessary to decide the alternative submi....
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....essee that the consideration paid by the assessee in excess of its value of tangible assets was rightly classified as goodwill. 7.4.4 In the light of above decisions, when we look at the facts of the instant case we find that in this case, in the business transfer agreement (BTA) there is no mention of goodwill. Further, the unit of M/s KOAL, which was acting as a agent for sale of electronic franking machines etc of M/s Pitney Bowes Inc, USA, in India and Nepal has been transferred to the assessee. It was the machines of M/s Pitney Bowes Inc., USA which are approved by the Department of post due to their technical competency. All the intellectual property rights in those machines were lied with M/s Pitney Bowes Inc. USA. Thus, it was the brand name of the "Pitney Bowes" on which M/s KOAL was floating. In the business transfer agreement (BTA) which is available on pages 1-48 of the volume 1A of the paper book, on page 12, a list of transferred assets is mentioned which included real property leased, tangible assets like furniture equipments machinery etc, contract license agreements etc, inventories of the seller in existence, government authorizations, computer hardware and pro....
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....sessee is not entitled for any claim of deduction enabling it to reduce its income in reassessment proceedings. In support of the contention, he relied on the decision of the Hon'ble High Court of Jammu and Kashmir in the case of CIT Vs. State Agro Development Corporation reported in (2001) 248 ITR 487. 7.5 We find force in the contention of the Ld. Sr. Departmental Representative. In appellate proceedings consequent to original assessment before the Ld. CIT-(A), the Tribunal, the Hon'ble High Court and the Hon'ble Supreme Court, the assessee did not file its claim for depreciation on goodwill and for the first time it made the claim in appellate proceeding corresponding to reassessment proceedings. We find that in the case of CIT Vs. State Agro Development Corporation (supra), the Hon'ble High Court of Jammu and Kashmir observed as under: "8. In view of the above legal position, in the case before it, the Supreme Court held: ".........Since the original assessment has been concluded finally against the assessee, it was not permissible for the assessee in the reassessment proceedings to seek a review/revision of the concluded assessment for the purpose of computation....
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....has grossly erred in upholding the disallowance of depreciation amounting to Rs. 98,80,220 on the intangible asset of " Government Authorizations" which was acquired by the appellant under a Business Transfer Agreement with the Kilburn Office Automation Limited. 3. That the Ld. CIT(A) has erred in upholding the disallowances of depreciation on the business or commercial rights acquired in the form of non-compete rights under section 32 of the Act having treated the said non-compete fee as capital expenditure in nature. 4. That the Ld. CIT(A) has grossly erred in not allowing depreciation on Goodwill being an intangible asset on which depreciation is mandatorily allowable. That the above grounds of appeal are without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of 10. The facts in brief of the case are that the assessee filed original return of income on 30/11/2006 declaring income of Rs. 4,95,64,342/-. The return was processed under section 143(1) of the Act on 30/01/2008. Subsequently, the Assessing Officer noticed in assessment proceeding of assessment year 2007-08, that the assessee claimed depreciation....
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....ment year 2007-08. Similarly, the disallowance of 1/5th of non-compete fee as deferred revenue expenditure was sustained. The Alternative plea of allowing depreciation on non-compete fees was also rejected following his order for assessment year 2007-08. The additional ground of the assessee seeking depreciation on goodwill was also rejected following his finding in assessment year 2007-08. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 11. In ground No. 1, the assessee has challenged validity of assessment proceeding under section 147 of the Act. 11.1 Before us, the Ld. counsel of the assessee filed paper book having two volumes i.e. Volume 1 and volume 2 (pages 1 to 104). The volume 1 was further divided in Volume 1A (pages from 1 to 242 ) and volume 1 B (pages from 243 to 451). These Volume 1A and Volume 1B are common for the appeals filed for assessment year 2005-06 to 2009-10. The learned counsel referred to the reasons recorded, available on page 29 of volume 2 of the paper book and submitted that the entire primary and material facts were made available at the time of assessment for 2005- 06 and therefore there was no ....
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.... After examination it was found that the expenditure was capital expenditure in nature and was wrongly claimed as deferred revenue expenditure. The similar deduction was claimed during the A.Y.2006-07 also. Thus, the assessee has claim and was allowed wrong deduction/excess deduction in respect of amount of non compete fee. Further the assessee has taken over business of franking machines from KOAL under business transfer agreement executed on 15/10/2004. The acquisition of above business was done on slump sale basis by paying a lump sum consideration. Out of total sale consideration paid, the assessee assigned value of Rs. 4,51,66,708/- to the Govt., approvals granted to KOAL for marketing franking machines by the Department of Post, Govt, of India and different State Governments. The assessee has claimed depreciation by treating the Govt. Approvals/Authorization as depreciable assets. Since the Govt. Approvals for marketing the franking machines are not depreciable asset, assessee has wrongly claimed and allowed depreciation on it. Thus, assessee's income has escaped assessment to this extent also. Under such circumstances I have reason to believe that assessee's income....
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....The relevant para of the decision is reproduced as under: "5. As to what constitutes valid "reasons to believe" is no longer a matter of debate. So long as the law declared in Kelvinator (supra) stands, a valid reopening of assessment has to be based only on tangible material to justify the conclusion that there is escapement of income. In the present case, the note forming part of the return clearly mentioned and described the nature of the receipt under a non-compete agreement. The reasons for the notice under section 147 nowhere mentioned that the Revenue came up with any other fresh material warranting re-opening of assessment. In these circumstances, the court is of the opinion that mere conclusion of the proceedings under section 143(1) ipso facto does not bring invocation of powers for reopening the assessment. We are satisfied that the Tribunal's reasons are justified and do not call for any interference." 11.10 It is relevant to refer the decision of the Hon'ble Jurisdictional High Court dated May 18, 2016 in the case of Indu Lata Rangwala Versus DCIT in Writ Petition (C) 1393/2002, where in the Hon'ble High Court considered the earlier decisions available on the....
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....ssessment on some fresh tangible material that provides the nexus or link to the formation of such belief. In a case where the initial return is processed under Section 143 (1) of the Act and an intimation is sent to the Assessee, the reopening of such assessment no doubt requires the AO to form reasons to believe that income has escaped assessment, but such reasons do not require any fresh tangible material. 35.7 In other words, where reopening is sought of an assessment in a situation where the initial return is processed under Section 143 (1) of the Act, the AO can form reasons to believe that income has escaped assessment by examining the very return and/or the documents accompanying the return. It is not necessary in such a case for the AO to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment. 35.8 In the assessment proceedings pursuant to such reopening, it will be open to the Assessee to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. 35....